Elevated Risks and the Economic Landscape

We are over one year removed from receiving an inverted yield curve, which has raised risks to the economy and potential impacts on stock market trends and the market forecast. Many wonder whether a recession is imminent or how, on a macroeconomic level, markets could be influenced by an upcoming election, various other hypotheticals, or shifting market forecasts.

The Limits of Cause and Effect in Market Movements

Most investors look for cause-and-effect explanations for market fluctuations and therefore study economic supply and demand, government policy, economic projections, price-earnings ratios, and balance sheets. However, at its core, big market movements and long-term trends stem from persistent money flows (more buyers than sellers or vice versa), regardless of the underlying news. Rather than attempting to predict future market movements through macro forecasting, our investment process identifies money flow trends and positions our portfolios accordingly.

Trend Indicators and Market Positioning

A common indicator for identifying trends is the rolling average of past prices, known as a moving average. If current prices are above this average, the trend is bullish; if below, it is bearish. So, if a bearish macro call is correct and the market falls 30% or more, market indices will likely drop below the moving average, indicating a trend change. In such cases, our process would position portfolios to sidestep most of the decline by identifying these changes in trend and money flows.

Our Commitment to a Disciplined and Adaptive Process

To summarize, the market acts as a discounting mechanism, and money flows provide evidence of whether a trend will continue or shift. Our focus is not to predict the market’s response to macroeconomic events or rely solely on the market forecast, but to follow a consistent, intuitive, and repeatable investment process. The main goal is to stay aligned with market trends, avoid significant drawdowns that could hinder financial plans, and participate in long-term uptrends.

Ready to Discuss Your Investment Strategy?

Has your current financial advisor discussed an investment strategy that aligns with your financial plan and objectives? There should be a clear and understandable process behind these conversations.

If you’re interested in discussing Gainplan’s investment strategies, we invite you to schedule a meeting with one of our relationship managers.

This website commentary reflects the personal opinions and analyses of Gainplan LLC employees. It does not describe Gainplan LLC’s advisory services or client investment performance. Views in the commentary may change anytime without notice. Nothing here constitutes investment advice, performance data, or recommendations for specific securities, transactions, or strategies. Mentioning a security or its performance is not a buy or sell recommendation. Gainplan LLC uses various investment strategies, not all discussed here. Investing in securities carries risks, including loss. Past performance does not guarantee future results.

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